Savings Strategies

Almost 70 percent of Americans live from paycheck to paycheck, courting disaster if their income is suddenly reduced or stopped. Hurricanes Katrina and Rita left many people with no homes and drastically reduced or no income. Rebuilding, for many, will require more money than you'll get from disaster recovery funds and insurance.

In order to restore or rebuild your home, you will need to rebuild your savings account. If you have an income, here are some strategies that can help you save money toward your home restoration or rebuilding project:Establish Savings Habits

Pay yourself first—Treat savings like a bill, just like your rent. Put part of every paycheck, even if it is only a few dollars, into savings for emergencies or future goals. A painless way to do this is through payroll deduction. If you don’t see the money, you won’t miss it or be tempted to use it for something else.

Collect coins—Place all loose change in a see-through container for motivation. When the container is full; deposit it in a savings account. “Kick it up a notch” by saving $1 a day plus change.

Save bonus/coupon money—Save any money earned or received that was not expected such as tax refunds, gift money, overtime pay, rebates and refunds. Deposit the money you “save” when using coupons in your savings account.

Continue installment loan repayments—When you pay off a loan, continue to write the check each month, but make the check payable to yourself for savings!

Plan a “Nothing Week” —For an entire week, do not spend more than is absolutely necessary; plan events, but save the money you would have spent and add it to your savings account.

Break costly habits—Are you trying to stop smoking? Save the money you would normally spend on habits you'd like to break.

Save “extra” paychecks—If you’re paid bi-weekly, you will receive three paychecks in two months each year. Employees who are paid weekly will receive an “extra” check in four months of each year. Save at least part of this money.

Reduce Household Expenses:

Brown-bag it—A 75-cent soft drink every day adds up to $188 per year. Buy 12 drinks on sale for $3, and you’ll save $125. Brown-bag your lunch several days a week, and you’ll save several hundred dollars each year.

Get discounts—Savvy consumers often obtain discounts on products and services (insurance, hotels, car rentals) by asking, “Is this the best price available?” Check for discounts available through organizations such as AAA or AARP.

Check your long distance and cell phone plans—Major carriers offer savings plans for consumers who request it. You may need to adjust your calling habits to get the lowest rate, but the savings can be impressive. If a plan saves $20 a month, that’s $240 a year of extra money in your pocket.

Financial Products and Services.

Get a cheaper credit card—Check http://www.bankrate.com/ or http://www.cardweb.com/ to find sources of low-rate credit cards. Transferring a $2,000 balance from an 18 percent card to a 10 percent card saves $160 a year in finance charges. Another way to reduce interest costs is to call your credit card issuer and request a lower interest rate.

Accelerate debt repayment -- pay more than the minimum payment on credit cards. For example, increasing minimum payment on a $2,000 balance at 18 percent interest from 2 percent to 3 percent can save $2,528 and reduce the payoff time by 11 years, 10 months.

Slash bank and investment fees—Avoid banks that charge high fees or require large minimum balances on low-yield accounts. Shop around for a better deal by comparing the characteristics and fee structure of at least three bank accounts. Also, avoid high brokerage firm commissions and above-average mutual fund expense ratios.

Automate Your Savings

Join an Employer’s Credit Union—Credit unions are convenient and an inexpensive source of funds when you need a loan. Deposits can be automatically deducted from your paycheck.

Over withhold income tax—This is not the best savings method because federal and state governments do not pay interest, and you must wait for your refund. Nevertheless, it’s one method people use to save money. Workers must adjust their W-4 forms accordingly.

Take Advantage of Free Money

Earned Income Tax Credit—Low-income savers who receive an Earned Income Tax Credit should try to save at least a portion of this “free” money.

IDA matches—Savers who qualify for an Individual Development Account program can earn substantial savings matches for homeownership, education or entrepreneurship.

Shop for sales—When you purchase an item on sale, save the difference between the sale price you paid and the full price you would have paid if the item had not been on sale.

Be a comparison shopper—Comparing products and prices can save as much as 50 percent off a price you might have paid without making the comparison.

Adopt the two-week rule—If you think you really want something, wait two weeks to get it. Waiting two weeks may allow you to find the item less expensively somewhere else, or you may discover you really don’t want the item when the initial excitement wears off.

Shop “alternative” venders—Shop where you can get the best value for your money. Consider flea markets, garage sales, thrift shops and consignment stores.

Become a coupon clipper—Use coupons to save money on items you normally buy. Spending 5 minutes a week to cut grocery coupons that save you $6 a week is like getting paid $72 an hour! In a year, you would save at least $300. Remember, pennies make dollars.

Be patient—Waiting for things to go on sale, rather than purchasing at full price, can bring substantial savings. This is especially true for clothing and seasonal items such as lawn-care equipment and supplies.